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Saudi Arabia Commodities September 2018

Saudi Arabia: Oil prices hit a nearly four-year high in September on supply concerns

October 1, 2018

Oil prices continued to climb in recent weeks due to fears of a decline in global supply once fresh U.S. sanctions against Iran come into force on 4 November. On 25 September, the OPEC oil basket traded at USD 80.9 per barrel, a 1.4% increase from the same day in August. The price was up 25.5% from the start of the year, and 45.5% higher than on the same day in 2017.

There is growing concern that global supply could be disrupted in the coming weeks by a major decline in Iranian oil exports due to the imposition of sanctions by the United States, which target all countries purchasing Iranian oil. According to some analysts, the drawdown could amount to 2 million barrels per day (mbpd). Moreover, despite complaints by U.S. President Donald Trump that oil prices were too high, OPEC and Russia have pushed back any initiative to boost crude supply. In addition, oil production remains sluggish in key countries such as Nigeria and Venezuela.

Combined oil output among OPEC members edged up from 32.29 mbpd in July to 32.57 mbpd in August, according to the cartel’s latest monthly report. The increase was mainly due to higher output in Libya and Nigeria. Moreover, Saudi Arabia pumped 10.40 mbpd in August, up from 10.36 mbpd in July. On the flip side, oil output in Iran and Venezuela fell significantly month-on-month.

FocusEconomics Consensus Forecast panelists expect oil production in Saudi Arabia to average 10.21 mbpd in 2018. In 2019, our panel of analysts sees crude output inching up to 10.44 mbpd.

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